Refunding bonds

(a) General rule.--If a borough acquires a water system subject to any existing lien or liens and, at the time of acquisition, issues utility bonds secured by the liens on the water system and which impose no municipal liability, when the utility bonds mature or at any time prior, the borough may issue and sell utility bonds for the purposes of refunding the outstanding bonds. The refunding bonds shall be issued as utility bonds pursuant to 53 Pa.C.S. Pt. VII Subpt. B (relating to indebtedness and borrowing). The issued bonds shall not be deemed to be the creation of new obligations but shall be deemed a continuation of the bonds existing or created at the time of the original acquisition of the water system. (b) Time, interest rate and amount.--The bonds shall not be refunded for a longer period than 20 years, and the refunding lien bonds issued shall not bear interest at a rate exceeding 6%. The aggregate amount of the issued refunding lien bonds shall not exceed the amount of the bonds to be refunded. Any money placed in any fund by the borough or by any commission of the water system for the purpose of redeeming or paying the bonds at maturity shall be first applied to the payment of the principal of the bonds to be refunded, and the balance of the bonds only shall be refunded by the issue of new bonds.